Future perfect

Good morning! A big hello to readers who signed up this week. Welcome to The Intersection, The Signal's weekend edition. This Saturday, we have an opinion piece on how changing the way we arrive at decisions could turn the odds in our favour. Hint: Think long-term. Also in today’s edition: we have curated the best weekend reads for you.

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We are on the far side of a pandemic, preparing for a global climate change conference that is likely to be contentious even as a recession tightens its grip on the global economy. The fear of an uncertain future breeds short-term survival strategies. Just getting to the next day feels like victory, a feeling we collectively experienced during the pandemic.

But weighing too much on the now can cause problems. We know how quarterly earnings pressure skews executives’ incentives and drives them to make bad decisions. Good decision-making asks for more.

Be it climate policy, personal finance, or fitness, the defining lens that explains the multiple problems we face in achieving desired goals is the one most of us know about, but can’t always execute: long-term thinking. Or to be more specific, thinking about long-term risks.

I will explain how. Let’s start with some historical context.

The idea of risk is rooted in the study of probabilities. This began in the 17th century as French mathematicians Blaise Pascal and Pierre de Fermat started calculating chances for dice games. That was the time betting on dice was considered a sin. God decided everything, including the number a roll of the dice would throw. So, playing with (and making money off) the almighty’s wish was blasphemy.

The duo—and those who followed—unknowingly led a revolution and changed the way we think about the future. The emergence of the risk-centric worldview is the defining boundary between past and present, Peter Bernstein wrote in Against the Gods, a remarkable book on the history of risk. It told the world that the “future is more than a whim of the gods and that men and women are not passive before nature”. In other words, we can put the “future at the service of the present” by understanding and measuring risk.

How do we do this?

By systematically and mathematically guessing what the future holds: describe everything that might happen in the future, assign a probability to each outcome, and use that to make decisions.

Nothing is guaranteed, though. It only raises the odds of things working out the way we want. This idea lies at the heart of financial markets. If you buy stocks and insurance, you know the game.

But translating this idea into everyday decision-making is hard. It requires the ability to think in the long term, and the ability to think probabilistically. Neither comes naturally to us.

Humans discount the future. Immediate rewards appear more appealing (pdf) than rewards far away in the future, even if they are better. We fall for instant gratification. Brain imaging studies offer another explanation: we don’t actually think about ourselves when we think of our future; we imagine a stranger. So we don’t care enough as we do for ourselves today. It costs us, and society too.

Adopting this frame shows why we struggle to solve critical global problems such as climate change, why most of us don’t factor aging well when thinking about fitness, and why we make poor investment decisions.

Climate change

Energy scientist Vaclav Smil's prescription for tackling the existential crisis of climate change is this: reduce net global carbon emissions to zero by 2050 and then go negative.

We don't necessarily need total decarbonisation, he says— “net zero” or “carbon neutrality” would do, meaning we can continue to use existing fossil-burning energy sources and balance it by removing carbon dioxide from the atmosphere and its permanent underground storage. The problem is the scale and complexity needed for carbon sequestration, since we are yet to develop a widespread and widely agreed-upon method to enable it.

If we put our minds to work and work cooperatively, we can build a better future. But we are failing. And Smil’s diagnosis is our collective inability to think of the long-term.

“Suppose we start investing like crazy and start bringing down the carbon as rapidly as possible. The first beneficiaries will be people living in the 2070s because of what’s already in the system. The temperature will keep rising even as we are reducing these emissions,” Smil said in an interview with The New York Times.

“So you are asking people now to make quote-unquote sacrifices while the first benefits will accrue to their children and the real benefits will accrue to their grandchildren. You have to redo the basic human wiring in the brain to change this risk analysis and say, I value 2055 or 2060 as much as I value tomorrow. None of us is wired to think that way.”

Fitness

The same lens shows the struggle of thinking about long-term health. More specifically, it shows the common misunderstanding of the idea of causation, and why we are continuously flooded with ‘X study shows do Y to live longer’ nonsense.

Go back to the mid-twentieth century. It took decades to establish that smoking causes lung cancer. Why? Because most smokers don’t get cancer. Some non-smokers do get cancer. All we can say is this: you are more likely to get cancer if you smoke than if you don’t. The idea of causation is not deterministic. It only means that if X happens, Y tends to happen more often.

That also makes it harder to see the benefits of diet and exercise as results play out in the long run. Take exercise. Unless you are training hard for a specific goal, it’s hard to know exactly how regular exercise impacts your overall health. You can’t know; it’s mostly invisible, and results are visible in the long run. The opposite is also true: repeatedly eating junk for instant gratification has no immediate significant consequences. The crisis builds up slowly.

In his book The Body: A Guide for Occupants, Bill Bryson offers the clearest explanation for this dilemma: “It is important to distinguish between probability and destiny. Just because you are obese or a smoker or couch potato doesn’t mean you are doomed to die before your time or that if you follow an ascetic regime you will avoid peril,” he wrote.

“Roughly 40% of people with diabetes, chronic hypertension, or cardiovascular disease were fit as a fiddle before they got ill, and roughly 20% of people who are severely overweight live to a ripe old age without ever doing anything about it. Just because you exercise regularly and eat a lot of salad doesn’t mean you have bought yourself a better lifespan. What you have bought is a better chance of having a better lifespan.”

I use this frame to tell myself the value of building habits and following rules known to most: cutting back on added sugar and refined grains, saying no to ultra-processed foods, adding plenty of vegetables, protein, and whole foods to our diets, and exercising regularly.

Personal finance

Investing is where avoiding the long view becomes most clear (and painful).

The key idea is compounding. In The Psychology of Money, Morgan Housel wrote: “If something compounds—if a little growth serves as the fuel for future growth—a small starting base can lead to results so extraordinary they seem to defy logic. It can be so logic-defying that you underestimate what’s possible, where growth comes from, and what it can lead to.”

We downplay the power of compounding as it defies intuition. Thinking about linear growth is easy; we struggle with the exponentials. Recall how Covid cases grew— all the discussions around “doubling rate” were a way to communicate the exponential growth in cases and explain the speed at which cases would blow up. That’s compounding.

And that’s why Housel says that “time is the most powerful force in investing” and argues that wealth creation has little to do with income or returns but lots to do with savings rate. So we should save for the sake of saving— without any reason to.

Our glitchy brain behaviour just makes this hard. “Why would you save money for your future self when, to your brain, it feels like you’re just handing away your money to a complete stranger?” says UCLA researcher Hal Hirschfield, referring to brain imaging studies that make us think of a stranger when we see ourselves in the future.

So here is the thing: there are clearly documented benefits of long-term thinking and clearly documented reasons why we struggle with it. Our best bet is to recognise its importance and find a way to change how we think and make an effort to train our brains to think long-term. And understand risk. It would make us and society better.

(Samarth Bansal is a Landour-based journalist)

ICYMI

Storm in a cone: Here is a story from The Financial Times where human values, business principles, corporate governance, and geopolitics create a perfect storm that has already claimed a CEO with no resolution in sight. Ice cream chain Ben and Jerry's, a Unilever subsidiary, decided to pull its Israel franchise to protest the West Bank occupation. An irate Israeli government and Jewish groups accused the group of anti-Semitism. Ironically, Ben and Jerry’s founders were so steeped in liberal values that they insisted Unilever representatives will always be in a minority on the company board as a condition for sale. Committed to ethics as it was, Unilever had no problems. Its shareholders did not think so, however. We think it would be a humdinger of an OTT series.

Green gold: Spain may be famous for its sprawling olive groves and vineyards, but it’s also one of Europe’s major pistachio producers. The quintessentially-Iranian fruit has taken over 70,000 hectares of Spanish countryside. The man responsible is agricultural engineer Jose Couceiro, who spent years perfecting a grafting method that’s now being sidelined as corporations swoop in to use ultra-intensive models for higher margins. Couceiro predicts an ecological disaster. Is anyone listening?

How Walmart went from zero to hero: Well, it wasn’t really a zero to begin with, but the world’s largest private employer was once deemed “the bully of Bentonville”. So, how did Walmart go from capitalist villain to a company that found favour with organisations such as the Environmental Defense Fund and WWF? This story charts the retail titan’s transition from (prioritising) shareholder returns to stakeholder capitalism. But it also asks whether all this is enough when you’re still one of corporate America’s worst paymasters.

Xi’s game of thrones: This Bloomberg interactive shows how Xi Jinping has gradually rewritten China’s rulebook ever since he became the undisputed leader of both the Chinese Communist Party and the world’s most populous country. And more rules may be broken so that he gets a third term as president, such as the retirement age of 68. Xi has also abolished presidential term limits and replaced 33 cadres in the Central Committee with loyal supporters.

Bollywood and the propaganda machine: Once upon a time, Bollywood was a democratic playground. That was until jingoism gradually became a part of the cinematic landscape. Shah Rukh Khan, who once ruled Hindi filmdom, was subject to right-wing attacks. Aamir Khan is still paying for his “sins”. A changing cultural and political dispensation means that series and movies that don’t conform to the prevalent mood are placed in a coma. This longread in The New Yorker dives deep into what today’s content tells us about the India we’re living in.

Gaming universe: Eighteen-year-old Minecraft player Cristopher Slayton is building an entire universe within the game, block by block. Slayton, also known as ChrisDaCow on social media (he has 25,000 followers on YouTube), has spent about two months studying blackholes and planets. He also went skydiving to get a better perspective of Earth. Slayton chatted with The New York Times about raising the standards of one of the greatest games ever made.

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